June Jobs Report Falls Far Short Of Expectations

Originally published on July 8, 2011 12:53 pm
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STEVE INSKEEP, host:

OK, we're tracking several news stories throughout this morning and here's one. We get an update today from the Labor Department on the nation's employment picture. There is one thing we can say for sure about the job market right now. All this talk of cutting deficits and austerity measures has meant the government is the weakest sector for employment. NPR's Yuki Noguchi has this report.

YUKI NOGUCHI: The recovery, at least officially, began two years ago, in June 2009. Since then a lot of economists have focused on business hiring; namely, the fact that businesses aren't hiring in large enough numbers to make a dent in the unemployment problem. But there's another way to look at it.

Mr. JOSH BIVENS (Economic Policy Institute): Since June 2009, private sector's shown positive growth and it's the government that's been a big drag.

NOGUCHI: Josh Bivens is an economist at the Economic Policy Institute. He says since the recovery began, businesses have added about one million jobs. Government, meanwhile, has cut 430,000. Bivens says shrinking government is part of our new reality.

Mr. BIVENS: All the signs on the horizon state, local and federal levels -seems to be further cuts.

NOGUCHI: For states, the new fiscal year just kicked off earlier this month, and governments everywhere seem to favor cutting spending rather than raising taxes. The National Association of State Budget Officers says 15 states plan additional layoffs. Eleven plan to reduce salaries. Bivens says it's unusual for the government to lay off in the middle of a rebound.

Mr. BIVENS: So basically any recovery that actually lasted for 24 months, we've never seen public-sector employment down over the course of a two-year recovery before.

NOGUCHI: So what does that mean for this recovery?

Mr. BIVENS: I think the takeaway is it's just one more stiff headwind.

NOGUCHI: Government jobs make up a sixth of the overall workforce. Bivens says normally it would be growing with the rest of the economy. But now he's hard pressed to say where the jobs might eventually materialize.

Mr. BIVENS: I guess one reason why I'm such a pessimist is I can't identify that sector for you. I mean, I absolutely know it's not going to be housing or construction. You know, I'd like to say manufacturing, but I don't really think so. I mean, we've got - you know, lots of our big trading partners are kind of embracing austerity right now.

NOGUCHI: Bivens says government spending creates a virtuous cycle in the jobs market. More spending would mean more consumer spending, which creates, in turn, more reasons for businesses to hire. But not everyone takes the view that the loss of government jobs is a negative for economic growth. Here's Chris Edwards, an economist with the CATO Institute.

Mr. CHRIS EDWARDS (CATO Institute): Government, in my view, is a takeaway from the private sector.

NOGUCHI: Edwards says this is because governments tax businesses in order to raise money to pay people in the public sector.

Mr. EDWARDS: When private sector jobs are created, you know it's efficient and good for the overall economy. So you know that it will expand the GDP. When government jobs are created, there's no market test there.

NOGUCHI: Government jobs were once synonymous with stable, virtually guaranteed lifetime employment. And this era of budget cutbacks will probably mean a permanent cultural shift in that way of thinking. John Challenger is CEO of the outplacement firm Challenger Gray & Christmas.

Mr. JOHN CHALLENGER (Challenger Gray & Christmas): Government jobs were safe for a long time, they were protected, but that's just no longer possible.

NOGUCHI: In fact, he says, people with corporate jobs right now are pretty safe. It's those with government jobs who face greater odds of getting a pink slip. And Christmas says these job losses will be very visible ones.

Mr. CHALLENGER: It is interesting. When we think about government cuts, you think of bureaucrats, you know, people sitting at desks where we just don't really need them. And yet the reality is, there's a lot of post office workers, mail deliverers, and policemen, firemen, teachers who are losing their jobs.

NOGUCHI: Christmas says the loss of government jobs may have another effect. It will change the gender imbalance among the unemployed.

Mr. CHALLENGER: Almost 60 percent of government workers are women, so they're now in a sector that's being hit much more heavily.

NOGUCHI: Christmas says the man-cession - so-called because male-dominated industries like construction and finance were hard hit - has ended. But the recovery will be much less kind to women.

Yuki Noguchi, NPR News, Washington.

STEVE INSKEEP, host:

Let's follow up now on the unemployment news, which is depressing. The Labor Department's latest unemployment report is bad. Only 18,000 jobs were added in June. That is hardly any in a country this size, and not nearly as many as were expected. And at the same time, the unemployment rate actually rose a bit more, to 9.2 percent. It was 9.1.

NPR's Yuki Noguchi is here with us now, live in our studios. Good morning, Yuki.

YUKI NOGUCHI: Good morning, Steve.

INKSEEP: What happened?

NOGUCHI: Well, what happened was that there wasn't a lot of jobs created. It's been, you know, as you mentioned, 18,000 jobs. A lot of economists were hoping for like 10 times that. So, for all practical purposes, this means the needle hasn't moved at all. And you know what's also bad is that in the last two months, you know, which were also not great, they revised their figures downward. So...

INSKEEP: Just to give a sense of the perspective of the disappointment, the scale of the disappointment, you're saying that some economists thought there'd be 180,000 jobs created. Even if there were 180,000 jobs created, that would've only been an all-right month. They really would like more than that month by month by month in order to really change the unemployment rate a lot. And they only ended up with a tenth of what they expected. This has got to be, got to be really disappointing - politically and economically.

NOGUCHI: I mean, yes. You know, and 180,000 would be probably in the top end, but what happened yesterday was there was this ADP payroll report that actually, you know, telegraphed that things were much better than expected. So economists had, you know, in some ways like boosted their estimates. And so this is like an extra big disappointment. And, you know, the disappointment here is also that they hoped that the soft patch was sort of firming up. You know, we were in this soft - a stronger period the first quarter and then...

INSKEEP: That employers were really going to be hiring.

NOGUCHI: Yeah, things were looking good. And then - and then it sort of, you know, went down. And this sort of indicates that actually, you know, all this mixed data that we've been seeing about housing prices falling and so on, you know, basically the economy is like moving barely with very little oomph behind it.

INSKEEP: What happens if you break it down between private sector jobs and public sector jobs?

NOGUCHI: Right. So business has at least added some jobs, and government is still cutting, right? So let's take it back two years, when the recovery started, June 2009. You know, in those two years businesses have added a net gain of a million jobs. Government has cut about nearly half million. And so, you know, in a normal rebound, you would see the government actually adding jobs, and you're not seeing that this time.

INSKEEP: And so all this talk of deficits and cutting back - it may be essential but it has a real effect on the economy, is what you're saying?

NOGUCHI: Yeah, I mean, for the long term, right, these austerity measures are going to be, you know, cutting jobs. I mean, that's the direction we're going in. And you know, is that a good thing? It sort of depends on what you believe. In the short term, if you have fewer jobs, that's fewer people spending money, you know, less hiring. But then again, you know, part of this whole deficit cutting discussion is predicated on the idea that we need a smaller, cheaper government, so.

INSKEEP: We should remember that some of these numbers come from different surveys. They don't always seem to match. For example, we do have the economy adding net jobs, and yet, the unemployment rate creeping up. It's separate surveys by separate methods.

On balance, basically, things are stagnant, the best you could possibly say about them. At the same time there was this other report earlier this week saying that layoffs by companies are down to their lowest levels in more than a decade, which must have been one of the reasons that economists were optimistic. How can that possibly match up with this news?

NOGUCHI: Well, actually, it's not that contradictory. I mean, usually you have a lot of hiring and firing going on. What we're talking about is a net number, right? People leave jobs, people get new ones. But now we're seeing just a lot less of both.

So, you know, if you have a job, then it means you have some relative job security right now. But if you're looking for a job, which you know, so many people are now, it's harder to find one. And it's also, you know, harder to move up in the world.

INSKEEP: Are employers still in a waiting mode then, waiting to see what happens with the economy over the next six months?

NOGUCHI: Yeah, I think there's a little bit of vicious cycle going on here. You know, if other - if the data doesn't look good, then it adds to the apprehension. You know, there's a lot of uncertainty, again, around the sort of debt ceiling discussions. All these things sort of contribute to a general, like, let's wait and see.

INSKEEP: Yuki, thanks very much.

NOGUCHI: Thank you.

INSKEEP: That's NPR's Yuki Noguchi bringing us up to date on the unemployment numbers. They're very significant politically, of course, for the Obama administration and others, and even more significant economically for those looking for work. The unemployment rate edges up to 9.2 percent. Transcript provided by NPR, Copyright NPR.